What Obama and the Feds Will Do About Washington and Colorado Legalization – Expert Analysis

Local author Jeremy Daw earned a J.D. from Harvard Law School in 2008 before becoming Editor-in-Chief of Cannabis Now Magazine and writing Weed the People: From Founding Fiber to Forbidden Fruit, a history of cannabis in the U.S. The Berkeley journalist kindly forwarded us his analysis on the options the Justice Department will likely present President Obama regarding legalization of pot in two states, and Obama’s likely choice. The answer: more drug war theater (with select raids and arrests) to look tough on pot, combined with huge taxes on pot businesses — both of which the industry and movement will survive.

What Will Obama Do About Marijuana Legalization?An historical, constitutional, and political analysis
by Jeremy Daw, J.D., 2008, Harvard Law School

From newspapers to televisions and from blogs to the Twitterverse, everyone is asking: what will Barack Obama do about cannabis in his second term?

No one seems to know the answer. And while I left my crystal ball at home, I do have some idea of the options probably being debated in the White House this very week. But before I get to those, I present some illuminating historical context:

A) Race has been a major motivating factor of US pot prohibition from its inception up to this very day. Recreational cannabis use went out of fashion in the US around the latter half of the 19th century and became reintroduced as a cultural practice in the early 20th century. Sadly, the primary cultural conduits of the practice – Mexican immigrants and (predominantly African-American) jazz musicians – were met with racist disdain by much of the white majority, and unscrupulous politicians saw the custom of smoking “reefers” as a convenient scapegoat for their race-baiting and fearmongering.

To cite one historical example: when the House Health Committee of the Montana state legislature met to consider passing their first cannabis prohibition law in 1929, they naturally referred to the expertise of the medical doctor in their group, a Dr. Fred Fulsher of Mineral County who assured the committee that “when some beet field peon takes a few rares of this stuff, he thinks he has just been elected president of Mexico so he starts out to execute all of his political enemies.”

Mere moments later, the bill was recommended for passage. As objectionable as such speech may be by today’s standards, it is tame compared to the writings of the chief architect of federal cannabis prohibition, Henry J. Anslinger. Anslinger, who was appointed the first commissioner of the Federal Bureau of Narcotics (the predecessor to the DEA) and held the post for an astonishing 33 years, kept a special file of prurient race-baiting “stories” with no apparent basis in fact – a file which he reliably trotted out any time a politician questioned his policies. A brief excerpt gives the gist (warning – graphic and offensive content):

Two Negros [sic] took a girl fourteen years old and kept her for two days in a hut under the influence of marihuana. Upon recovery she was found to be suffering from syphilis.

Colored students at the Univ. of Minn. partying with female students (white) smoking and getting their sympathy with stories of racial persecution. Result pregnancy.

This racist legacy at the core of pot prohibition in its infancy has continued right into the 21st century, when racial minorities are arrested for cannabis crimes at rates significantly higher than their white peers, despite loads of evidence establishing that white and minority Americans use cannabis at about the same rate. While, in fairness, some of this disparity can be explained by environmental factors (e.g., a 2007 RAND study finding that African-Americans are more likely to buy cannabis outside, compared to whites in the same city who more often conducted the transactions in their homes), there is still a mountain of evidence revealing racist motivations within police departments and other law enforcement institutions (see the upcoming issue of Cannabis Now Magazine for more information).

In sum, it can scarcely be doubted that the United States have inherited a long history of hate-filled race relations in the form of its anti-marijuana policies, and that this sad heritage is alive, well, and still influencing cannabis politics. This is the elephant in the Oval Office: as a man of mixed race, President Obama cannot escape the historical fact that any move he makes which could be perceived as promoting (or “getting soft on”) cannabis use in the US will trigger a cultural response with deep roots in history. Or does anyone believe that America has fully shed the mantle of its racist past?

B) Federal cannabis policy lies at the crux of debates about federal and state powers. When Henry Anslinger was picked to head the country’s first independent federal drug bureau, the country’s legal academy universally agreed that federal cannabis prohibition would be blatantly unconstitutional. Nothing in the US Constitution, they correctly pointed out, authorized Congress to pass such blanket regulations of a plant that could be found growing in backyards and abandoned lots all throughout the country; to the contrary, the Constitution as interpreted in the thirties specifically limited the ability of Congress to certain “enumerated” powers which were specifically listed in the document’s first article. The enumerated powers, like the power to levy taxes or to regulate commerce which crossed state lines, could be used as the basis of acts by Congress; all other powers were specifically reserved by the Tenth Amendment to the states “or to the people.” Some pointed out that a ban on imports and exports of cannabis would be constitutional under Congress’ power to regulate interstate commerce, but a broad consensus of observers, even in the Federal Bureau of Narcotics itself, agreed that any attempts to go further – to tell a private citizen what plants he could grow in his own yard – would be a vast overreach of federal power. The Constitution simply didn’t authorize it.

But Anslinger found a loophole in the Constitution, pushing through Congress a federal law which worked in harmony with state policy to create total marijuana lockdown. The states, free under the Tenth Amendment to ban cannabis under their so-called “general police powers,” passed – at Anslinger’s insistent urging – the Uniform State Narcotics Acts, which made marijuana illegal in every state. Anslinger, still unsatisfied, then lobbied Congress to pass his Marihuana Tax Stamp Act, a bill which would make it a crime for anyone who buys or sells cannabis to fail to register their transaction with the IRS (then called the “Bureau of Internal Revenue”). On paper, the Tax Stamp Act was designed to raise revenue for the federal government (the measure included a $1 per ounce sales tax), but in practice, Anslinger wielded the law like a club: any cannabis farmer who attempted to comply with federal law saw their tax stamp application used as a confession against him in state court.

By the time a unanimous Supreme Court struck down the Marihuana Tax Stamp Act in 1969, the damage had already been done. Federal cannabis prohibition, a mainstay of American life for over thirty years, had become accepted by a public accustomed to expansions of federal power once considered outrageous. Thus, few legal scholars blinked when the Tax Stamp Act became replaced by the Controlled Substances Act of 1970, which claimed to “regulate” certain drugs under the Commerce Clause. And the Supreme Court, unwilling to entirely negate the Drug War which provided one of the earliest excuses for Capitol Hill power grabs, allowed the CSA to go into effect, even ruling in 2005’s Gonzalez v. Raich that a disabled woman who grew her own medical marijuana at home strictly for her own use could have her home invaded and cannabis garden destroyed by armed federal agents, under the dubious theory that her backyard garden was somehow affecting interstate commerce.

More recently, when Chief Justice Roberts promulgated the most significant reduction in Congress’ Commerce Clause authority in over seventy years (in his historic ruling upholding the Affordable Care Act on other grounds), he went out of his way to insist that the ruling in no way affected the DEA’s ability to raid medical marijuana users and providers. Thus we see what we should expect: that powerful figures in Washington, D.C. will not readily give up the laws which originally empowered them: one could even say that Washington is addicted to its cannabis laws.

C) There are vast sums of money at stake.

Many authors, most notably Jack Herer, have written about the ugly underside of economics creating financial incentives for powerful industries to oppose any easing of cannabis laws. While Herer overstated some of his claims, his central insight was nonetheless instructive: there are many powerful people who stand to lose money if cannabis were fully legalized. First and foremost in such a list are the shareholders of transnational oil companies, which continue to post historic profits while the majority of American workers enjoy no such gravy train. George W. Bush’s plan to require all gasoline sold in the US to contain at least 10% ethanol was designed to appear as if it would favor American farmers over Middle Eastern oil producers, but in reality the proposal has been a ruse: the production of fuel ethanol and its $6 billion of subsidies has been captured by the powerful corn lobby, and corn is one of the least efficient ways to grow biofuels. Thus the promise of lower gas prices has yet to materialize.

Industrial hemp, now legal under Washington and Colorado state law, shows considerably more promise than corn as a source of biofuel. The prodigious biomass producer so impressed Henry Ford as a source of fuel that he built a car to run on 100% hemp ethanol and proposed biofuels as a way to end all petroleum imports. Ford’s prototype worked just fine, but federal cannabis prohibition (which the petrochemical industries lobbied heavily for) killed the program before he could begin mass production. Modern observers see the same potential for hemp ethanol today as Ford did in the thirties, predicting that America’s heartland could produce enough hemp to end all petroleum imports from the Middle East. Anyone invested in Middle Eastern oil fields would hate to see that happen.

But there’s another side to the economic coin, too: an end of all state and federal interference in the cannabis industry would probably lead to a huge drop in pot prices: one respected source claims that production costs for sinsemilla could drop to around $20/pound. While no one knows for sure whether such a prediction would be accurate, there can be little question that a totally unimpeded cannabis industry could ditch many of the techniques now employed – especially costly and wasteful indoor cultivation – which are responsible for driving up the price. A hands-off approach in Washington and Colorado could easily lead to lower street prices in other states.

D) The White House has many options on the table. Far too many commentators think of cannabis policy in purely binary terms: is it legal or illegal? In truth, the White House has a whole range of potential policy responses on the table, which I have grouped into major categories below, along with commentary on the political cost/benefit analysis attendant with each tactic:

1. Take over the former law enforcement duties of state and local police, attempting to arrest and prosecute everyone who violates federal cannabis law. The backlash against such an unprecedented overreach of federal power would be severe. While Washington, D.C. has happily interfered with cannabis counterculture for 75 years, the drug czars learned early on that trying to interfere with individual users makes for very bad politics. Harry Anslinger tried such a strategy as soon as his Tax Stamp Act became law; but he retreated almost immediately, instead pioneering the strategy of targeting distribution networks and celebrities still used today. Even George W. Bush, who took a hard line on all matters marijuana, was forced to backpedal after getting caught raiding the home stash of a disabled woman (the Raich case). It’s highly unlikely that Obama, who has already been saddled with criticism (justified or not) of his Socialist big-government policies, will nullify all effect of Tuesday’s vote. Some compromise will have to be found.

2. Shut down all cannabis clubs as they open, and prosecute everyone involved in their creation – including city and state officials who attempt to collect taxes from the sale of cannabis. The severest alternative Obama could be seriously considering would be to decline prosecution of private citizens and small cooperatives and focus instead on charging the most conspicuous players in the production and distribution sectors – the package stores, coffee shops, and farms. Under this scenario, private citizens could grow their own pot and share it informally with each other with very little fear of arrest while anyone trying to make a quick buck will need to watch out. A slight tweak of this approach would be to essentially copy the Netherlands model of keeping cultivation technically illegal while declining to prosecute dealers or “coffee shops” who only sell small amounts (say, an ounce at a time). While this policy would avoid awkward accusations of federal invasion of states’ rights, it still preserves the significant disadvantage of leaving large portions of the marijuana industry unregulated and untaxed.

3. Allow some clubs to open, but provide discretion to US Attorneys to close for-profit or politically unpopular clubs. This option is perhaps the most similar to the doctrine Obama has followed concerning medical marijuana dispensaries: give somewhat vague guidance to US Attorneys and grant them wide discretion to interpret them, with the overall goal of shaping – rather than shutting down – a burgeoning industry through a scheme of selective prosecution. While technically reserving the right to prosecute any trafficker in marijuana for any reason, Obama’s DOJ could issue guidelines regarding the priority of enforcement – to focus resources on shutting down the clubs which create public nuisance, keep a double set of books, or try to evade taxes, to name a few metrics. An intriguing corollary to this approach would be to prosecute any for-profit distribution concerns while de-prioritizing enforcement against not-for-profit cooperatives – and simultaneously taxing them, which leads nicely to the next option.

4. Allow some concerns to operate in the industry, but saddle them with unequal tax burdens. This option too lies not so far afield from policy already in place. Whereas George W. Bush relied on the DEA to conduct his raids, under Obama the IRS has played an ever larger role. Obama’s IRS has made clever use of Internal Revenue Code section 280(E), which was passed in the eighties following public outcry over drug kingpins who successfully reduced their tax evasion sentences by utilizing the same tax writeoffs – like yachts and seaplanes – available to other wealthy businessmen. 280(E) made a special exception for traffickers in Schedule I and II substances (including cannabis): no longer would they be allowed to utilize the same business tax deductions available to any other kind of business. Under current tax court case law, this provision has been applied to dispensaries in such a way as to tax them as much as possible without actually putting them out of business.

If Obama takes too hard a stance on the upcoming Green Rush, he risks driving a valuable source of revenue back underground right at the same moment that a so-called “fiscal cliff” threatens the financial solvency of the United States. And remember: this goes as well for industrial uses of hemp, of which more than 30,000 had already been invented in the U.S. prior to its banning in 1937. The clever creativity of the American people combined with the extraordinary utility of a versatile plant represents opportunities for new job sectors too tempting to ignore for a president mired in high unemployment numbers. And every new invented use for hemp expands the tax base.

5. Order the DOJ to take a stance of nonenforcement in Washington and Colorado and/or medical states. Under the public relations banner of “the people have spoken,” declare a hands-off policy in Colorado and Washington – the ultimate win for libertarian activists. The biggest problem with this course is the problem of closing the lid once this Pandora’s Box has been opened. As Jonathan Caulkins et al point out in their excellent book Marijuana Legalization: What Everyone Needs to Know, the effect of even one state legalizing cannabis (in the absence of federal interference) would be to significantly reduce the street price of weed in any adjacent state which still criminalizes it. But Obama in effect has not one, or even two, but eighteen states (plus his home city of Washington, D.C.) which have passed some kind of significant cannabis reform and will assuredly cry foul if he doesn’t end federal raids in their jurisdictions, too. Ending federal interference in such vast swaths of the country would deal a severe blow to the drug war as a whole. Obama will not take this step unless subjected to intense political pressure.

6. Reschedule cannabis, or encourage the courts to “force” him to. There’s an optimist’s case that Obama’s ultimate goal is to significantly reform federal cannabis laws. The case is based more in personal narrative than in first-term policy: as a racial minority who enjoyed cannabis in his youth and could have very easily watched his career ruined by getting caught, Barack Obama is presumably sympathetic on a personal level to advocates who point out glaring racial disparities in the enforcement of cannabis laws, as well as to those who decry harsh penalties for a relatively harmless drug on principle. Perhaps, goes the theory, the “tough on crime” posturing of his first term was only a political ploy to ease his reelection, and now that he has won a second term, Obama will show his true stripes.

Perhaps. But there are plenty of other caveats to consider. As much as he may want to reform drug laws on a personal level, Obama is nonetheless hampered by the heritage of an ugly racial history entwined with those same laws since their inception (see discussion above). Given this history, the president would risk an extraordinary level of political capital on any proposed easing of federal law through legislative channels; and other issues, such as healthcare, the environment, and above all jobs appear to rank higher on his list of legislative priorities.

If Obama really does want to end pot prohibition but doesn’t want to take such a large risk, he has an alternate strategy which he could play through the courts. At this very moment, two historic lawsuits are working their way through the federal court system: a petition by Americans for Safe Access to reschedule cannabis, and a sought injunction by the City of Oakland against federal action to shut down Harborside Health Center, a significant source of the struggling city’s tax revenue. Obama could – as he did with the Defense of Marriage Act – instruct his attorneys not to defend the government’s position in federal court, essentially handing the plaintiffs a win by forfeit. But such a strategy would likely be just as injurious to his political capital as proposing a change of law in Congress or ordering the DEA to reschedule directly. So if he means to legalize cannabis through the courts, he must be more subtle.

Here we may take a lesson from the Obamacare decision – Chief Justice Roberts, while allowing the Affordable Care Act to stand, nevertheless fired a constitutional warning shot across the White House’s bow when he declared that he would not uphold the health care law under federal interstate commerce powers – the same powers, by the way, which provide the foundation for federal pot prohibition. If Roberts means to knit his historical legacy out of a series of decisions chipping away at big federal government power, Obama’s legal team could play into the chief justice’s hand by framing their arguments ostensibly in favor of cannabis prohibition in such a way as to gift-wrap Roberts the legal reasoning he will need to push his agenda.

Then, after the Supreme Court rules that the DEA has to reschedule cannabis based on constitutional principles, Obama can claim that he has no choice but to do as they command. Think of it as backdoor legalization.

While no one knows for sure which of these courses Obama will take, the most likely policy will be some combination of options 3 and 4. By following a course of selective prosecution and levying crushing tax bills, the president can save money, raise revenue, duck accusations of government overreach, and appear “tough” on cannabis for the media – all at the same time.

While such an approach moderately puts the brakes on the advance of progress, citizens of Washington and Colorado can still rejoice – their will was heard, and their votes will have a significant effect (if not quite as much as they wanted). Last Tuesday will still be remembered as an historic day.

[You can reach Jeremy Daw on Facebook, Twitter @weed_the_people, or at his book’s website. ]

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